Are your family business ownership documents in order?

Members of a family business may be tempted to adopt ownership documents (such as shareholder, partnership and LLC agreements) that are less robust than would be the case if the owners were unrelated. The rationale is that “because we’re family, we don’t need a lot of complicated legal documents.” This is a great concept, except when it does not work.

Contracts are critical only when there are disagreements. If the owners of a particular family business can guarantee they will never have a disagreement, then well-prepared legal documents may not be necessary. This, obviously, is not a realistic assumption. In the event of a dispute, it is essential to have a detailed written understanding worked out in advance that will minimize the number of important issues left open for argument.

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